Accounting: Subtle Issues in Revenue Recognition
- Topics:
- GAAP,
- Revenue recognition
- Source:
- The CPA Journal
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Overview: In recent years, concerns related to the recognition of revenue in accordance with GAAP have risen in significance. Not only the fraudulent acts of recording revenue improperly through sham transactions, but subtler practices, such as recognizing revenue before it is earned, have drawn more intense regulatory scrutiny. GAAP for revenue recognition seems fairly straightforward. Revenue is generally considered realized when cash is received for the sale of a product or performance of a service and becomes realizable when a promise to pay is received in exchange for the sale of a product or performance of a service. Although the rules seem simple, transactions can become quite complicated, raising questions about the timing and measurement of revenue. Thus various practices have been identified as matters of concern by both the SEC and FASB, which continue to monitor most of them. Hence the four areas of difficulty in revenue recognition discussed in this issue raise questions about the credibility of accounting practices and should be resolved as quickly as possible.
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Format: HTML | Date: Mar 2001 | Pages: 1
